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Litigation specialist weighing up lawsuit against ABN Amro

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GLOBAL – IMF Australia, a listed company that provides funding for large legal claims, is exploring the possibility of launching a class-action lawsuit against the wholesale branch of ABN Amro for allegedly mis-selling "risky" structured products to European pension funds and banks.

John Walker, director at the Sydney-based litigation specialist, said IMF Australia had already identified at least €1.4bn of "tainted" constant proportion debt obligation notes (CPDOs), developed and issued by ABN Amro in 2006.

For reasons of confidentiality, however, he declined to identify the pension funds involved in the prospective case, or their country of origin.

Walker's announcement came on the back of an Australian federal court ruling, which concluded that ABN Amro's wholesale operations – now part of Royal Bank of Scotland – was guilty of engaging in "misleading and deceptive" conduct.

In the case, justice Jayne Jagot ruled that ratings agency Standard & Poor's had misled and deceived investors, when it awarded its highest-grade credit rating to CPDOs whose value collapsed in the run-up to the financial crisis.

She described the ABN Amro-issued securities as "grotesquely complicated".

The highly leveraged credit derivatives had an operational term of 10 years.

Within this period, the CPDO would make or lose money through national credit default swap contracts (CDS), referencing two CDS indices known as CDX and iTraxx indices.

Together, the indices – weighted at 50% each – were known as the Globoxx index.

As a result of the collapsing CPDOs, 12 local authorities in Australia that had invested in the securities lost more than AUD16m (€13m).

Justice Jagot awarded the suing authorities AUD30m for damages and costs after she concluded that "a reasonable, competent rating agency" would never have given the securities a AAA rating.

IMF Australia, which has already indicated that it would back a class-action lawsuit on behalf of Australian clients, said it expected investors in New Zealand to launch a claim against S&P and ABN Amro as well.

A spokeswoman at Royal Bank of Scotland said it was studying the "very complex" court ruling before considering its next steps.

S&P has indicated that it will appeal against the ruling.

PGGM, the €128bn asset manager of the €125bn Dutch healthcare scheme PFZW, declined to comment when asked by IPE whether it had acquired ABN Amro's CPDOs.

Both APG, the €314bn asset manager for civil service scheme ABP, and MN Services, the €80bn asset manager for the large metal schemes PMT and PME, said they have never invested in CPDOs.

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